India merger of Sony, Zee to create TV powerhouse challenging Disney



* Merger to lead to India's biggest entertainment network

* Deal promises edge in market share for Zee, Sony over Disney

* Could help Sony raise funds to bid for sporting events

By Shilpa Jamkhandikar and Sankalp Phartiyal

MUMBAI, Sept 23 (Reuters) - A merger of India's Zee ZEE.NS and a domestic unit of Japan's Sony Group Corp 6758.T will create a television powerhouse to grab more advertising revenue, challenging top rival Walt Disney Co DIS.N in a key growth market, industry officials said.

The Sony-Zee alliance, with about 75 news, entertainment, sports and movie channels in more than 10 languages, stands to become India's biggest player, with a market share of 27% outstripping that of Disney's Star India, at 24%.

"This will give them significant distribution muscle and an ad wallet," Uday Sodhi, a former Sony Digital head in India, told Reuters. "They will become a formidable force."

Wednesday's plan, to be finalised over 90 days of exclusive talks, will see Sony pump growth capital to the tune of $1.6 billion into its domestic unit to boost the prospects of the combined firm, while taking a majority stake in Zee.

The Sony funds will enhance the combined company's digital platforms and its ability to bid for broadcasting rights in the fast-growing sports landscape, the two firms have said.

"For the first time there's a viable challenge to Disney (in India)," said one former Disney executive, who sought anonymity because he was not authorised to speak to media about the company.

Disney, whose Star India network has dozens of popular entertainment and sports channels, did not respond to a request for comment from Reuters.

Both firms have operated for years in India, where accountants KPMG estimated the television entertainment industry to be worth $10.5 billion in 2020.

The proposed deal aims to unite their networks, digital assets, production operations and program libraries, the firms have said.

India, with a population of 1.4 billion, promises eyeballs on a scale few nations can offer: 900 million television viewers, most of whom are crazy about cricket and sport, as well as melodramatic romance dramas.

Sport is a critical battleground, the executives said.

The merged combination will have better prospects to lure strategic investors or raise funds to bid for the rights to major events, such as the Indian Premier League (IPL) cricket tournament, said the former Disney executive and three others.

Disney's Star won the rights for India's international and domestic cricket matches for 2018 to 2023 for $946.75 million, and paid $2.22 billion to bag the worldwide IPL rights for five years until 2022.

Some of those rights come up for bidding next year.

Both Sony and Zee also have online digital streaming platforms that will take on the Disney+ Hotstar service, further ratcheting up competition in a market where Netflix NFLX.O and Amazon AMZN.O also operate.
Reporting by Shilpa Jamkhandikar and Sankalp Phartiyal; Additional reporting by Nupur Anand; Editing by Aditya Kalra and Clarence Fernandez

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